Central bank issues 1 trillion kip-denominated bonds
Central bank issues 1 trillion kip-denominated bonds
The Bank of the Lao PDR (BOL) is now in the process of distributing 1 trillion kip’s worth of denominated bonds to commercial banks in Laos in an effort to ensure the health of the banking system.
According to banking sector experts, the distribution of denominated bonds is not practiced in Laos alone but is considered a common practice on international bond markets and proven to be effective.
The development of the bond market aims to ensure financial security in the banking system in order to make sure they are able to provide loans for the business sector, development projects and other projects in need of finance.
BOL Governor, Dr Somphao Phaysith spoke about the situation of the domestic bond market at a recent press conference after the conclusion of the government meeting last month.
“The Ministry of Finance in collaboration with BOL has distributed the bonds through the BOL and the bidding process and the process of bond distribution is now in the preliminary stage,” he said.
He said that distribution of the bonds has been divided into two rounds. In the first round, the bank earned 288 billion kip while the second round is valued at 97 billion kip in denominated bonds.
“The process of distribution is done by bidding mode, which has attracted interest from a number of commercial banks. Those banks that propose proper prices for bidding will be able to secure the bonds,” he said.
Dr Somphao stressed that after the sale of the bonds was successfully achieved in the debut round, distribution during the second stage will be much easier.
“The sale of the bonds will be useful for solving financial difficulties in the banking system. The bonds can be sold when they are needed.”
The Lao government issues treasury bills on a regular basis to finance the country’s budget deficit as it is also drafting an Enterprise Law that will support future corporate bond development.
Last year Laos sold its first international bonds to Thailand, which were worth over 1.5 billion baht (almost US$50 million).
Thailand granted Laos approval to issue baht bonds as a contribution to the Asian Bond Markets Initiative and the Asean Economic Community blueprint that aims at improving economic relations in the region.
vientiane times
